Getting Ready To Go Into Rehab

Jan and I joke about it all the time and occasionally there are whispers among those who do not know us when we throw a picture of a house on Facebook and throw a comment like "Jan's going into rehab.  We all wish her luck".  Rehab as most people know it is no laughing matter and we empathize with people who really do into rehab for whatever reason.  For us renovating a house is like rehab..

There's a lot of angst and trepidation beforhand and we are always questioning whether we are ready for this again.  Eventually we locate a suitable home and then its off to the races with almost as prep before we close the deal as we expect after and the real work has started.  On top of that I have a full time job that at times can be demanding for time.  Needless to say I've worked a 30 hour weekend only to get on a plane Monday morning.  Sometimes I question whether I go to work to rest or vice versa because the lines are so blurred at times.

What we call Rehab 4470 is the house number of our next project and we are looking forward to sharing our what we hope is only an 8 week journey..   We already found rats in the attic from the inspection and are now trying to figure out which walls can take down..  along the way we'd like your suggestions.  One thing I've learned there's always great ideas out there - ya just gotta find them! 

The "Wow!" Effect - Part 1 Creating It

In a rehab in every encounter, appearance creates the first impression. When a real estate rehab is sharp and distinctive, it evokes a pleasant first impression that can be best translated into “Wow!”.

When looking at real estate and trying to determine what to update one of the key considerations is how to create the "Wow!" effect from the time the potential buyer pulls in the driveway to looking at the back porch. Most people associate the "Wow!" effect to kitchens and baths or flooring but we believe it covers the gamut. In effect the rehabbed house should fit together and not appear cobbled together or half done. The potential buyer should feel as though there is little to nothing they will have to do to move in. They can always debate what you may have done but they should not debate they have to undo it!

What that said we also consider the typical demographic of the potential buyer when creating the "Wow!" effect. For example, retirees have very different needs and ideas than a family with 3 kids. Retirees, especially from up north, will be looking for the "Florida" lifestyle. They need enough room to have the grand kids once a year and not too much room to maintain. They are not our parents parents and look increasingly more for a "Wow!" look and feel at an affordable price. A family with three kids looks for almost the exact opposite. A room for each kid, a large family room, pool for the kids and big yard. The point is to know who your ideal buyer is before you rehab the house so you can target the "Wow!" to your ideal buyer. This can only increase your chances of a quick sell.

When rehabbing a house we are constantly looking for the "Wow!" effect as a potential buyer would walk through the home when it's complete. We actually visualize and discuss what a buyer may be feeling from the moment they walk into the home to walking the entire floor plan. We also try to create a differentiation with the rehab compared to the other houses in the neighborhood. So when a buyer starts to compare our house with the rest of the neighborhood there is a clear difference in a positive way. So when all things considered the buyer will want the rehabbed house due to the differences since the price difference is minimal. Using this strategy we've been able to obtain a higher per square price than most of the comparable properties.

A key component to the “Wow!” effect is the creation of visual focal points. Visual focal points are used to highlight design, space, or feature aspects by making them stand out. This can be accomplished either through the nature of the feature itself or by bringing attention to the feature. An example of this would be to trim out an existing plant shelf and then possibly put an item on the shelf that draws your eyes to the feature. The cost to do this is very low and the return high. You could also add color to the room and paint the trim a different color in effect adding contrast and creating a visual focal point.  Visual focal points are also very powerful in making buyers not look at things because they are focused away from them.

We appreciate you comments and thoughts on this posting and be sure to sign up as a follower.

Craigslist for Finding and Selling Stuff

Of all the websites that we use we have found that Craigslist has been the best for both buying and selling materials during a real estate rehab.  This includes stuff we take out of the house under rehab to looking for stuff we need.  The last house we picked up two bathroom vanities for $60 each that would have cost over $300 each if we paid retail.  We were trying to fill a gap 8ft long where we had ripped out the old vanity and plumbed in another sink.You can see the before and after pictures below where we used a bridge section between the vanities to connect them and give it a moderm look and feel.  We also salvaged the mirror and picture framed it out for a couple of bucks..

If you've never been to Craigslist it's a web site that looks like and acts very much like the way classifieds used to in the newspaper.  Ads can be posted by anyone to any category and the ads are displayed in a category in the order they were posted.   Ads are displayed for 30 days and each day they move futher down the list. 

Once you selected a city to search the website remembers your "location" each time you revisit.  You can search by category or use the tool bar to the left side that allows you to search across categories.  The nice about the search function is that it will return results outside your home area.  So for example, if I search for "sink" from my home page of Sarasota-Bradenton the search results will into the entire Tampa Bay area.  The "For Sale" categories we've had the most success include:

>  Materials >  Furniture >  Household >  Tools >  Farm and Garden >  Wanted

After spending literally days looking for stuff here's our tips for looking for and selling stuff.

WHEN LOOKING

>  Be patient - looking for and finding good stuff takes time.
>  Search widely and across categories - More often than not the kind of stuff you'll need is listed under "materials".  However, remember the ads are placed by the author.  We've found vanities under "household".  Depending on what you need extend the distance you are willing to travel to get it.  We live in the Sarasota-Bradenton area and have gone north into Pinellas and south to Port Charlotte.
>  Make Offers - Remember they are selling it to get rid of it (and make $$ of course).  I've found everyone can budge some on price and depending how much you are buying it may provide them incentive.
>  Move Fast - Good stuff doesn't stick around long.  If you think its a deal and it's still out there for 2 weeks after the first post
>  Place a "Wanted" ad - by placing a wanted ad you may find that what you are looking comes to you.  In some cases it might be business that is looking to get rid of excess or discontinued inventory.

WHEN SELLING

>  Be patient - Also repost your ads every day so they are always at the top.
>  Price it low - I always think of Craigslist as a fire sale .  Besides if you don't sell it may end up in your garage.  I also compare prices to other postings.
>  Cash only - Never take a check and tell them that before they come over. If they show up without cash send them away.
>  Never Hold an Item - I've learned this the hard way and lost out of selling to a real buyer.  First come, first serve.
>  Never wait for someone to Show - I know people are basically good however you're dealing with strangers on craigslist that you'll most likely never see again.  I always have them work around my schedule an call before they come and if they are going to be late..

We appreciate your comments on this post and sharing any further ideas.   Happy rehab..

Finding Property - Considerations

I find that locating a good deal in real estate can take a fair amount of effort.  As a rule of thumb a good deal is a property that can be purchased at a price that after rehabed yields a profit - yes that makes sense, I know.  

When looking for real estate we focus on a lot of factors some of where are listed below.  By no means is this intended to be an all inclusive list, just some items quite honestly that make sense and are tried and true on our end. 

1. Is the neighborhood desirable and do people want to live there?
• Even in this current real estate market there are neighborhoods that are desirable and where people what to live.   An easy example is Lido Key in Sarasota that has only slipped 20 - 30% in average sales price compared to areas in Port Charlotte that are selling for more less than $0.30 on the dollar. 
2. What is the demographics of the property and neighborhood in general?
• Understanding your buyer profile and under what type of terms they are capable is important.  The easy question is "Are they typically cash buyers?"  If they need to finance it can be a problem these days unless they are using hard money lenders.  Believe it our not there are still neighborhoods where people are willing to pay cash.
3. What is the sellers motivation?  Is it due to foreclosures or are there other factors?
• This is by far the most important consideration and sometimes the most difficult to understand especially if you are dealing with a real estate agent.  Typically this means we submit a large number of offers looking for that motivated buyer to fall out.  It also is not uncommon to submit the same offer until the property sells depending on the sellers motivation.    Property in Trusts or in probate are excellent targets that typically have out state owners that are highly motivated.  This type of information is usually publically available on government web sites such as http://www.clerkofcourts.com/ for Manatee county and http://www.sarasotaclerk.com/  for Sarasota.
4. How does the property compare to others in the same or similiar neighborhoods? 
• The rule of thumb it should always look like the worst on the streeet however sometimes the problem is inside and not outside.  The question really should be "can I add curb appeal at low cost"? 
5. What conservative price can you reasonably obtain for the rehabbed property? 
• This means pricing the property competively such that it sells quickly after the rehab is completed.  It also means you're lowering risk by pricing it competitively.  Obviously the bigger the gap between what you buy a property for and what you sell if for minus the rehab and carrying costs equals the profit.  Be overly conservative on your estimates for what you can sell the rehabed property for.
6. How quick can it be rehabed and back on the market? 
• Although some people feel the market has bottomed do not assume it has.  If you can't complete the rehab and have the house back on the market in 8 weeks seriously consider a different property.  Faster the better, it also lowers your carrying costs which is money in your pocket.

Just a few thoughts and considerations from our experiences..

Finding home bargains

Finding a bargain home can a challenging task with home prices continuing to drop and a seemingly endless supply of bank owned property and short sales continung to drive the market down.  In looking for investment homes we try to stay ahead of the market and get out quickly when rehabbing not only to limit our carrying costs but to in effect stay ahead of the market.  It can be a tricky venture and we find it takes alot of time and effort to find those "bargain" properties and beat out other investors or even worse - someone that is buying to live in the property.

The key to looking for real estate is to educate yourself to the point that when you locate a prospective property you know its a deal and can act quickly.  The other point is to not rule anything out and to use all the tools at your disposal such as real estate agents (a good one can make a difference), government web sites that contain all types of information on the property history and current owners (think motivation), zillow for comps, and a slew of others resources that when leveraged can paint the complete picture of a piece of property.

Prestin Ely a friend of mine has made millions in real estate and has recently created a software tool that does all the work of looking and making offers.  Preston offers some unique approaches.. check it out and happy hunting and rehabbing.

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